Pre Budget Report 2009. A Quick Summary

Yesterday saw Mr Darling’s second Pre Budget Report since taking office last year. So, how does it compare with last years, and how will it affect us all?

Some of you may recall that my main concern last year, as it was for most commentators, was the optimistic nature of the Mr Darling’s projections, both in terms of future economic growth and potential cost savings.

In the 2008 Pre Budget Report, the Chancellor predicted 2009 borrowings of £78bn, rising to £118bn in 2010. (Earlier in 2008, he was predicting borrowings of £38bn).

So where are we now? Well, according to Mr Darling, the Government will spend £178bn more than it earns, this year alone, with overall borrowings rising by £789bn in the next 5 years.

The concern at the moment is that these projections are based on assumptions that the economy will start to grow rapidly, and that taxes will rise, after which, the level of debt should fall. Bearing in mind the Chancellor’s ongoing history of extreme optimism, it’s not the most encouraging of plans.

Ok, but why is this Pre Budget Report so important? Well, it’s the last throw of the dice (perhaps a rather unfortunate analogy) for Labour and it will lay down some of the policies that will be used to fight the general election next year. This is particularly important, as we plough our way through the longest recession on record, when employment is on the increase, and Labour are about as popular as a fart in a spacesuit.

The Government really needs to cut spending and increase taxes if they are to tackle our current debt crisis, but that will hardly boost their popularity in the run up to the election.

So that’s where we are, but what’s the plan, and how will it actually affect us?

The Highs

Bankers’ bonuses will, effectively, be taxed at 90%. (Yes, I know that’s not a high, if you’re a banker, but I can’t help feeling it will raise an approving smile from the majority of us) The bankers, themselves, already pay tax of 40% on these bonuses, and, now the banks, themselves, will also have to pay a further 50% of any bonuses in excess of £25,000. Sounds great, but it is only expected to raise around £500 million, a drop in the £178bn deficit ocean expected this year alone.

The 2008 Pre Budget Report announced plans to allow businesses to spread their tax payments in times of financial hardship. This has now been extended “for as long as it is needed” which should avoid too many businesses going bust as a result of a large, unexpected tax demand.

The ‘Access To Credit Scheme” has been extended. This is the scheme whereby the Government guarantees borrowing by businesses, thereby increasing the likelihood of the banks lending to them.

Empty property relief (where empty properties, with a rateable value below £18,000, are not subject to business rates, as long as they remain empty) has also been extended.

The Increase in small company taxation, originally scheduled to kick in from April next year, has been suspended for a second year in a row.

In order to allow more over 65s to claim Working Tax Credits, the hours needed to work, in order to qualify for them, have been reduced.

Currently, any 18-24 year old, who has been out of work for more than 12 months is guaranteed work or training. From next month, this has been reduced to 6 months.

State pension is to increase by 2.5% in April next year.

At the other end of the spectrum, child benefits are to increase, by 1.5%, from the same date.

Interestingly, Mr Darling has given a global guarantee that anyone in work will always be better off than they were on benefits.

One piece of good news for the elderly is the announcement of discounts on new boilers, which will, hopefully, help those who struggle with the rapidly increasing energy prices.

Free school meals were announced for 500,000 children from low income families.

The Lows

VAT will return to 17.5% from 1 January 2010. Not only will this reverse the, admittedly questionable, benefit of reducing the VAT level last year, but those businesses who spent the time and money changing price lists etc must now repeat the process, once again.

As with VAT, the stamp duty threshold reverts to its previous level of £125,000.

Anyone earning in excess of £20,000 will see an increase in tax, and a further 0.5% increase in National Insurance, for both the employer and the employee.

Missed by some, the 40% tax threshold has remained the same. This means that anyone getting a pay rise this year, who is already close to this level, will now fall under the 40% income tax rate for the first time.

Spending will be capped at £32bn (the same as last year) although there are expected to be further ‘efficiency savings’. In the long term though, spending is expected to slow down.

Pay rises for Government employees are to be capped at 1% from 2011 onwards.

Plans to increase the inheritance tax threshold, from £325,000 to £350,000 were postponed until 2011. It is estimated that over 100,000 additional homes will be caught by this, as a result.

Conclusion

On the face of it, there are more highs than lows in this budget, but is it enough? The current economic climate demands immediate and dramatic action.

Unfortunately, the Pre Budget Report has been prepared by a Chancellor who (a) has a history of excessive optimism, and (b) will not want to ‘rock the boat’ too much, in the face of an upcoming general election.

Mr Darling has hinted at future tax hikes and cuts in spending, but ‘not yet’.

There are one or two popular moves, such as the super tax on bankers’ bonuses as well as some of the new greener policies and help for the youth of the country, but, once again, we have to ask; “Is it enough?” The statement that; “anyone in work will always be better off than they were on benefits” is a bold and admirable one, but is it really achievable, and, more importantly, how will it help the expected £178bn deficit this year?

Once again, it remains to be seen.

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For those of you with no life, and loads of time on their hands, we have reproduced the full transcript of Mr Darling's Pre Budget Report Speech on our web site.

Check it out at http://www.1stadditions.biz/cdata/33039/docs/2213990_1.doc

Working From Home. What Are The Implications?

If you work at or from home, the part of the property used for work may be liable to business rates (also known as non-domestic rates) whilst the remainder of the property will continue to be liable to council tax (although an alteration may be made to its banding).

To decide whether or not part of your property should be liable to business rates there are a number of things we have to consider, including the extent and frequency of the non-domestic (business) use of the room (or rooms) and any modifications made to the property to accommodate that use.

Each case is considered on its own merits, and normally The Valuations Office Agency (VOA) will visit your property to check the facts before an assessment is made for non-domestic rates.

Business rates

If your property needs to be assessed for business rates, the VOA will work out a rateable value for the part that is used for non-domestic purposes. Rateable values are based in broad terms on the annual rent for a building or part of a building if it was available to let on the open market at a fixed valuation date. Currently this is 1 April 2003

It is important to note that rateable values are a key factor in the calculation of business rates but they are not the rates bill. An increase or decrease in rateable value does not automatically lead to a smaller or larger bill because the final calculation is based on a number of other factors.

These include transitional relief and the multiplier, (rate in the pound) which is set by the Department for Communities and Local Government (for England) and the National Assembly for Wales. Local authorities are responsible for calculating actual rates bills and for collecting rates.

For more information, please contact your local Valuation Office - details are in the phone book - or visit www.voa.gov.uk and http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858808&topicId=1074019801&r.l2=1073859221&r.s=tl - both official government websites

Below are some examples of assessments we might make where part of a property is used for both domestic and non-domestic purposes

1. A detached Edwardian dwelling in a residential area owned and occupied by a self-employed solicitor who practices from the property, specialising in matrimonial law. The front room on the ground floor is furnished with sofa and comfortable chairs, has a TV set, and ornaments/photos of a personal nature displayed around the room. It is used on an occasional basis as a waiting room for clients during weekdays, and as the lounge by the solicitor during evenings and weekends.

The former dining room is used as an office equipped with computer, dedicated fax and telephone line, filing cabinets, desk and shelving stocked with law books. No domestic use is made of this room. It is used by a part-time secretary when the solicitor is visiting clients or attending court.

The ground floor kitchen is used for preparation of family meals, but also to make tea or coffee for clients. The first floor accommodation of bedroom and bathroom is wholly used for domestic purposes.

Conclusion: The office is the only non-domestic part and will be assessed for business rates. The main purpose of the front room is to serve as a lounge. In this instance, the non-domestic use is sufficiently minimal so as not to warrant assessment for business rates. The lounge and the remainder of the dwelling will be banded for council tax purposes.

2. An integral garage of an estate house is converted to an office with plastered walls, electric power points, solidfront, suspended ceiling and floor screed suitable for carpeting. A separate telephone line has been installed. Access is through the hallway of the house. All toilet facilities are in the main house.

The room is used by the family in the evenings and occasionally at weekends. During the day the occupier designs computer software. He is employed by a major company to work at home, because of a physical disability. All of the equipment has been provided by his company and is specially adapted for his needs. He visits his employer's office on an occasional basis for meetings with colleagues and customers.

Conclusion: The former garage is no longer domestic property. It has been adapted for office use and should be assessed for business rates. The remainder is domestic.

3.The occupier is employed as a site finder by a major building company, and travels across most of the southern part of the country, using her home as a base, but calling into the company office once a week to pick up new instructions, for meetings, and to leave completed work.
She has a four drawer cabinet in the corner of a dining room, which also functions as an 'office' for the family computer, and there is no dedicated telephone line for business purposes.
The occupier is out visiting sites four days a week, and does 'writing up' at home on the dining room table in the evenings and at weekends. No clients or members of the public visit the house for business purposes.

Conclusion: Dwelling is domestic property, and should be banded for council tax.

4. A doctor uses a room in his house as a consulting room three days a week. The main practice surgery is situated some three miles away near the town centre. The house is more convenient for patients who live locally.

A concrete ramp has been added to the front door and the door opening to the hall and the consulting room has been widened to accommodate a wheelchair. No one in the doctor's family is disabled.

In the room itself there is an examination couch which is essentially a single bed with a cotton sheet thrown over it. A paper sheet is added and removed after use by each patient.

There is no office desk as such but there is a computer, table and chair in a corner of the room, which are used by the doctor during his consultations.

No patients records are held at the house, nor are there any medicines. Basic medical equipment is kept in the doctors medical bag or stored in a drawer after use.

There is planning consent for use as a branch surgery and part of the front garden has been surfaced to accommodate two to three extra private vehicles. There are parking restrictions in the street.

On the walls of the consulting room the doctor has attached pictures painted by his young children, and there are toys in the corner of the room, which belong to his children but can be played with by young patients. There is a brass sign outside the front door to advertise surgery hours.

The remainder of the week the doctor attends surgeries at the main premises, and in the afternoons he makes house calls. Other than for consultations the room is often unused, but when friends come to stay it can be used as a spare bedroom. At weekends, and some evenings the doctor uses the room to read professional papers or watch a portable TV away from the children.

Conclusion: The principal use of this room is as a doctor's surgery, and occasional use for domestic purposes is minor. The room should be separately assessed for business rates, and the remainder of the dwelling banded for council tax.

5. A teleworker formerly employed by a large national company in a call centre now works for the company five days a week at home, using a spare bedroom to house an office desk, telephone consul, computer terminal and chair all supplied by her employer. Her hours are flexible but generally the room is used for the purposes of work at least 40 hours each week. During evenings and weekends it is used by other members of the family for leisure purposes, and by the taxpayer for doing domestic chores such as ironing. No physical alterations have been made to the property other than installation of new telephone lines, and no members of the public or work colleagues visit the house for business purposes.

Conclusion: Rateability will not arise unless equipment of a non-domestic sort is installed or the property is physically adapted for the business use. This is because the character of the room remains as domestic living accommodation, and the purposes of living accommodation may include recreational and leisure use and work. Also the taxpayer uses furniture and equipment of the kinds that are commonly found in domestic property.

OK, so why is this so important, and what are the tax implications of this legislation?

Well, firstly, for most of us who work from home, we are able to claim an element of the household running costs, based on floor area, or, more simply, number of rooms. This will include a proportion of domestic council tax for the whole property. Where a room is deemed to be used exclusively for business purposes, and is, therefore, subject to business rates, those rates will be 100% allowable, for business purposes.

On the down side, there could just be a Capital Gains Tax implication. Contrary to popular opinion, simply claiming part of your property as a business expense will not automatically mean that element of the property is subject to CGT, but you need to be aware of the criteria.

You will still be eligible for Private Residence Relief, providing you keep using all of the house as a home. In other words, if the room or rooms used have dual purpose (office and spare room, for example) or have not been modified in any way, then full PRR will still be available. If, on the other hand, you have converted your garage to a joiner's workshop, including modifications to the power supply etc, this is likely to be subject to both business rates and, ultimately, Capital Gains Tax on the sale of the property.

For this reason, it's always wise to plan your business usage claims properly, especially if there is a private usage of the room, or rooms, concerned.

Remember, there may well be other things to consider, such as notifying your insurers, landlord or mortgage company, as well as being aware of any covenants that may affect the property, and, more specifically, running a business from it.

HMRC Offers Practical Help For People Affected By Flooding

HM Revenue & Customs (HMRC) has a special Helpline for anyone affected by the recent floods, where, they say, fast, practical help and advice is available.

You can contact the Helpline on 0845 3000 157 between 8am and 8pm Monday to Friday and 8am to 4pm Saturday and Sunday.

Financial Secretary to the Treasury, Stephen Timms MP said:

“We want people to be able to concentrate on recovering from the recent events. A quick call to the HMRC helpline will give peace of mind, enabling customers to focus on restoring their homes and businesses.”

Each call to the helpline will be handled on its own merits but HMRC may be able to help by:

agreeing a revised payment schedule when customers are unable to pay due to financial difficulties caused by the flooding

agreeing practical arrangements where individuals and businesses cannot comply with their tax obligations perhaps because their records have been lost or destroyed in the flooding

reviewing any penalties or not imposing additional surcharges that may be triggered where customers have missed deadlines as a result of the flooding

providing help and advice in dealing with other practical, tax related matters arising as a result of the flooding.

The service is available for all HMRC taxes, including VAT, Corporation Tax, Income Tax and NICs (PAYE) and for individuals affected by the flooding.

Tax credit recipients are asked to continue to use the helpline number 0845 300 3900.

Businesses needing to discuss rescheduling payments as a result of the general economic situation rather than issues relating specifically to flooding should continue to contact the

Business Payment Support Service on 0845 302 1435.

Contacts

NDS Enquiries

Phone: For enquiries please contact the above department

ndsenquiries@coi.gsi.gov.uk

Reproduced from NAT 83/09

HMRC Advisory Fuel Rates Change Again

On 3 January this year, we blogged on the new HMRC advisory fuel rates. These are the rates used to calculate the VAT element of any vehicles mileage rates claimed, such as those under the Fixed Profits Car Scheme.

This original article can be revisited at; http://1staddition.blogspot.com/search?q=Mileage+rates if you want to check out the specifics.

As of 1 December 2009, these rates have, once again, changed. The revised rates are now available on the HMRC web site, at the following link; http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

New Minimum Holiday Entitlement

October has been a busy month for changes in legislation. One of these is the increase in holiday entitlement from 24 to 28 days (5.6 weeks) including bank holidays.

The 28 day entitlement applies to those of us working a full 5 day week. This is applied pro rata to those on part time hours. (For example, 22.4 days, for anyone on a four day week).

Other holiday pay basics are as follows:

• Holiday starts to accrue as soon as an employee begins work.
• The employer can control when the holdiay is taken.
• Employees are entitled to normal pay whilst on holiday.
• When an employee leaves, they are entitled to be paid for holiday accrued but not taken.
• Bank & public holidays can be included in the annual entitlement.
• An employee continues to be entitled to their holiday leave throughout their ordinary and additional maternity leave, paternity leave and adoption leave.

New National Minimum Wage From 1 October 2009

The National Minimum Wage has increased, again, from the beginning of this month.

New rates from that date are as follows;

• For workers aged 22 or over: £5.80 per hour
• For workers aged 18 - 21, inclusive: £4.83 per hour
• For workers aged under 18 (but above compulsory school age): £3.57 per hour

Almost all workers are entitled to NMW, but there are some groups who are not.

• Self employed people
• Apprentices under the age of 19
• Apprentices aged 19 years or over, but only for the first year of their apprenticeship
• Children who are still of compulsory school age.

So, if you're an employee, you should now be paid at least these hourly rates. As an employer, you need to be aware of the rates, to ensure you are keeping up with your legislative responsibilities.

Companies Act 2006, Introduces Complete Set of New Companies House Forms

From 1 October 2009, the Companies Act 2006 has introduced a set of new forms for conducting day to day company business.

These new forms cover everything from Annual Returns to changes in directors, registered office, accounting reference date etc.

Those of us familiar with the completion of a Form 363 (Annual Return) will now be doing so on a Form AR01. The original Form 288(a) (Appointment of Director / Secretary) has now been replaced by a Form AP01 (Director), AP02 (Appointment of Corporate Director), AP03 (Secretary) and AP04 (Corporate Secretary). (Good to see, another Government Department helping to simplify administration. Hmmmm).

A full list of the new Companies Act 2006 forms is available on the following link (including details of the original 2005 Act forms they are replacing).:

www.companieshouse.gov.uk/forms/formsOnline.shtml#Company

Full details of the new Companies Act implications can be found at:

www.companieshouse.gov.uk/companiesAct/companiesAct.shtml

VAT Changes For Online Payment & Filing

In a bid to move ever closer to the phasing out of paper filing, HMRC have announced new Government proposals as follows:

• From 1 April 2010, all VAT registered businesses with an annual turnover of £100,000 or more (excluding VAT) must file their tax returns online and pay electronically.
  
• From that same date, all businesses newly registering for VAT, whatever their turnover, must file their returns online and pay electronically.
  

Paper returns will still be an option for the remaining VAT registered businesses, but this will be reviewed More information can be found on the HMRC web site, at http://www.hmrc.gov.uk/vat/start/register/signup-online.htm

Changes To Banking Services And Making Payments To HMRC

During 2009, H M Revenue & Customs are moving over to new banking arrangements.

The banking details are as follows:

Current Bank Account Details:

Account Name: HMRC VAT

Sort Code: 10 00 00

Account Number: 52055000

New Bank Account Details:

Account Name: HMRC VAT

Sort Code: 08 32 00

Account Number: 11963155

If you use online banking, and have stored templates or transactions, that you use when making your current VAT payments, you may need to update these to reflect the changes.

More information or guidance can be found at http://hmrc.gov.uk/payinghmrc/

HMRC Introduces Standard 'Benchmark' Scale Rates For Subsistence

On 2 April 2009, HMRC issued Brief 24/09 covering the new scale rates for day subsistence. (Day rates only, overnight allowances are unaffected).

Their aim is to cover allowable travelling expenses, paid to employees, free of Tax & NI.

Introduction

HM Revenue & Customs (HMRC) has introduced an advisory system of benchmark scale rates which employers can use to make subsistence payments to employees who incur allowable business travel expenses free of tax and National Insurance contributions (NICs). The new advisory system was implemented from 6 April 2009.

The advisory system only covers benchmark scale rates for day subsistence payments. If an employer wishes to pay subsistence to employees who have to stay overnight they can either reimburse the actual cost incurred by the employee or agree a tailored scale rate to cover meals and other expenses in a dispensation with HMRC.

The brief sets out the framework for the system.

Overview

Under the current rules an employer is required to notify HMRC of all expenses paid to an employee, even where those expenses would be allowable, unless they have a dispensation. A dispensation is an agreement between HMRC and an employer which allows the employer to pay an agreed rate for allowable expenses without the need to report the expenses to HMRC. An employer may apply for a dispensation by submitting a completed form P11DX. As part of this process, where business travel expenses are paid, the employer often agrees scale rates for travel and subsistence expenses with HMRC that broadly match the allowable expenditure incurred by its employees on business travel.

HMRC currently expects employers to conduct a sampling exercise before it will agree to a particular rate being included within a dispensation. The aim of the exercise is to identify a reasonable level of allowable expenditure that reflects the most common level of spending.
HMRC recognises that a sampling exercise can be burdensome and expensive for employers. It has therefore introduced an advisory system of benchmark scale rates for day subsistence payments that an employer can use without having to carry out a sampling exercise.

As part of this new approach, in response to concerns from some employers and professional advisers about consistency between what is agreed for different employers, HMRC also proposes to standardise the different scale rates that it will agree with employers.

Benchmark system/rules

Under the benchmark system, HMRC has set advisory scale rates for particular day subsistence expenses that it will accept for all employers. As long as the employee has incurred subsistence expenses while travelling on an allowable business journey, employers will be able to make tax and NICs free subsistence payments up to the advisory rates without agreeing them with HMRC. Employers wishing to use the benchmark scale rates for subsistence payments will simply need to notify HMRC of their intention by ticking the appropriate statement/box on form P11DX before starting to use the system.

The rates that can be used will be:

Breakfast rate (irregular early starters only) - A rate of up to £5.00 may be paid where a worker leaves home earlier than usual and before 6.00 am and incurs a cost on breakfast taken away from his home. If the employee regularly leaves home before 6.00 am because, for example, he works an early shift he would not be entitled to use the breakfast benchmark scale rate.

One meal rate (Five hour rate) - A rate of up to £5.00 may be paid where the worker has been away from his home/normal place of work for a period of at least five hours and has incurred a cost on a meal.

Two meal rate (Ten hour rate) - A rate of up to £10.00 may be paid where the worker has been away from his home/normal place of work for a period of at least ten hours and has incurred a cost on a meal or meals.

Late evening meal rate (irregular late finishers only) - A rate of up to £15.00 may be paid where the employee has to work later than usual, finishes work after 8.00 pm having worked his normal day and has to buy a meal which he would usually have at home.
If the employee is paid an allowance under the five or ten hour rule, the late meal allowance could still be paid if he finishes work after 8.00 pm and buys a meal that he would usually have at home. However, if the employee regularly finishes work late because, for example, he normally works the afternoon or evening shift, he would not be entitled to use the late evening meal rate.

Particular issues and exemptions

Payments in excess of the benchmark rates

The benchmark rates are the maximum tax and NICs free amounts that could be paid by employers who choose to use this system. An employer could pay less than this rate if it wants to do so. If a higher amount is paid without agreeing a tailored scale rate with HMRC, the excess should be subject to tax and NICs.

Qualifying conditions

Benchmark scale rates must only be used where all the qualifying conditions are met.

The qualifying conditions are:

• the travel must be in the performance of an employee’s duties or to a temporary place of work

• the employee should be absent from his normal place of work or home for a continuous period in excess of five hours or ten hours

• the employee should have incurred a cost on a meal (food and drink) after starting the journey
Early starter and late finisher ratesThe early starter and late finisher rates are for use in exceptional circumstances only and not intended for employees with regular early or late work patterns.

Tax and NICs free scale rate payments must be limited to three meal rates in one day (or 24 hour period). A meal is defined as a combination of food and drink.

Where employees are required to start early or finish late on a regular basis, the over five hours or over ten hours rates could be paid provided all the other qualifying rules are satisfied.

Working Rule Agreements

Benchmark scale rates would not apply to employees covered by Working Rule Agreements, for which separate specific rates are already set for particular occupations.

Friends and Family Allowance

Some existing dispensations also include a tax free scale rate for staying with family and friends when employees are required to stay overnight on business. HMRC has reviewed this policy and concluded that there is no legal basis for giving tax relief because it is not linked to any specific underlying expense. Therefore, a scale rate for staying with family and friends will not be included within the advisory system or given in any new dispensations. All agreed tax and NICs free scale rates in existing dispensations covering such an allowance will be withdrawn when the dispensation comes up for review.

Questions and answers

What you have to do if you want to pay scale rates to your employees?

You should apply to HMRC for a dispensation. You need to complete a form P11DX, which is the form used by employers to apply for a dispensation, and submit it to HMRC. On the form you need to indicate with a tick against the appropriate statement under 'Travel and Subsistence' that you intend using HMRC’s benchmark scale rates to reimburse your employees’ subsistence payments. By ticking this box you would be merely notifying HMRC that you intend paying HMRC’s benchmark scale rates for day subsistence and that you have adequate management processes in place to ensure that payments are only made where all the qualifying conditions are met. If you want to apply to include other items of allowable expenditure in a dispensation for example fees and subscriptions, laundry, telephone charges, etc, you need to tick the appropriate boxes and supply the requested information on the form.

When can you pay a scale rate?

Scale rate payments may be made to employees who necessarily travel in the performance of their duties or have to travel to a temporary place of work. The statutory rules are in Section 336 to 342 of Income Tax (Earnings and Pensions) Act 2003. Where the employer agrees a scale rate in a dispensation, the scale rate may also be taken into account for NIC purposes.
Guidance on how the employment income travel expense rules work can be found in HMRC’s Booklet 490. This booklet will be updated shortly to reflect the new scale rates system available to employers from April 2009.

When must you not pay tax and NICs free scale rates?

Tax and NICs free scale rates must not be paid where the employee is not travelling on a qualifying business journey. For example, when on a journey that involves ordinary commuting (or similar to ordinary commuting), or private travel.
Additionally, no tax and NICs free payment should be made if an employee does not incur an expense on meals after leaving home or his normal place of work, even if the journey was a qualifying business journey. This means that employees who do not buy a meal or who take a packed lunch from home are not entitled to a tax and NICs free payment.

Do employers have to use the benchmark scale rates?

Employers do not have to use the benchmark rates. They can reimburse their employees’ actual expenditure or apply to HMRC to agree a scale rate appropriate for their business needs in a dispensation. However, where an employer wants to use a higher scale rate, it will have to undertake a sampling exercise to show the higher rates are in line with what its employees’ typically spend on subsistence and agree the rate with HMRC.

What records would an employer need to keep?

An employer will need to keep sufficient records to be able to demonstrate that the employee was entitled to the payment. An employer also needs to be able to demonstrate that routine checks are undertaken to ensure that the travel expenses rules are being followed.

What happens to existing dispensations?

Existing dispensations will remain in force until they come up for review in accordance with HMRC’s rolling review programme, usually on a five year cycle. When the existing dispensation comes up for review the employer can choose to switch to benchmark scale rates or apply to continue to use a tailored rate. Where a new dispensation is requested the employer will have to go through the process of undertaking a statistically valid sampling exercise.

Uprating benchmark scale rates

HMRC will review the rates annually and consider revising them when there has been a change in the scale rate of plus or minus 10 per cent based on the Consumer Price Index from when it was last revised.

How has HMRC arrived at the benchmark scale rates in question?

HMRC reviewed the scale rates agreed for a number of employers, both large and small, and based the rates on the most commonly agreed rates.
Why not have higher benchmark rates for London or other locations where prices are more expensive?The benchmark rates are linked to what employers typically reimburse their employees and it would not be possible to break this down between different locations. Personal expenditure on subsistence varies significantly between employees even when working at the same location.

If an employer typically reimburses more than the benchmark rates then it will remain open to them to agree a higher rate with HMRC or to reimburse actual expenditure.

Companies Act 2006 Kicks In From 1 October 2009

The Companies Act 2006 has made a number of changes, many of which will affect us, as small businesses, and some of which have already been actioned.

Where Are We Now?

The following changes have already taken place. (Some are optional, others are not).

You Must:

• be aged 16 or over to be appointed a director.

You Do Not Need To:

• appoint a company secretary, if you are a private company (though you can still do so, if you wish).
• hold an annual general meeting, if you are a private company, again, unless you opt to do so.
• have a unanimous vote for resolutions. Subject to articles, if you are a private company. Members may agree in writing to resolutions.
• get a court order to make capital reductions as a private company - they can be supported by a solvency statement instead.

What We Can Look Forward To:

• Directors address protected from disclosure. From 1 October, each director will have a service address, and a usual residential address. The former will be in the public domain, with the latter only being available to public authorities and credit reference agencies. Initially, the director's residential address will automatically become the service address, though you will be able to specify an alternative address (such as the company's registered office) on the Companies House website.
• Also, there will be an alternative address for the company to specify where its registers can be made available for public inspection. This can either be the registered office, or a single alternative inspection location (SAIL).
• A number of changes have been made to make it easier to set up a limited company..
• There will be changes to company articles for new companies. They will include the company's objects and liabilities - which were previously in the memorandum. Copies of model articles are available on the Companies House website.
• Any ammendments to the company's articles must be notified to Companies House, within 15 days. Failure to do so is a criminal offence, carrying a civil penalty of £200.

Also remember; all Companies House accounts filing deadlines have been reduced, by one month to 9 months (private companies) and 6 months (public companies). This applies to all accounting periods beginning on, or after, 6 April 2008.

Failure to comply will result in a fine of up to £1,500.

From 1 October 2009, all original Companies House forms are being replaced. Watch this space for a future blog post on this particular change.

In the interim, you can check out the new provisions of the Act on the following link, including transitional provisions, and downloadable versions of the new forms.:

http://www.companieshouse.gov.uk/companiesAct/companiesAct.shtml

Companies House has produced guidance notes, in a variety of formats, giving step by step instructions on how to form a limited company.